Regional and local economics Slide 1 Aims n Examine what problems regional economic integration creates & look at the arguments for and against an EU-wide.

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Presentation on theme: "Regional and local economics Slide 1 Aims n Examine what problems regional economic integration creates & look at the arguments for and against an EU-wide."— Presentation transcript:

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Regional and local economics Slide 1 Aims n Examine what problems regional economic integration creates & look at the arguments for and against an EU-wide regional policy n Review the main principles and funding streams underpinning current EU regional policy n Evaluate EU regional policy and the future shape of policy after 2007 Outcomes n Be able to argue the rationale for and against a trans-national regional policy n Have a working knowledge of the priority areas that have received funding, the reasons for this and the likely direction of policy in the future. Trans-national regional policy: The EU becomes a major player. Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 2 n Common Market – customs unions free movement of capital and labour internally, common external trade policies n EMU - fiscal and monetary policy by a central authority may also be common currency. Three processes taking place - n Dismantling of NTBs, Enlargement, Monetary union Benefits - n Lower prices for goods and services as a result of a larger market n No exchange rate costs; Lower inflation; More jobs; n Improved balance of payments; Lower member state public sector deficits The EU is an Economic Union but what does this mean? Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 4 Arguments for n Ensure policy spending matches the severity of the problems faced n The EU can greatly improve the co-ordination of regional policy n Offers a means by which any one member can legitimately assist other member states. n Further integration is preconditioned on stabilising the periphery Against n Uniform approaches do not work because problems differ Over centralisation stifles innovation n Centralisation discourages local participation Arguments for and against an EU-wide regional policy Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 5 EU regional policy or “Structural Funds” are the 2 nd largest expenditure item in the EU Budget. The size of the fund has more than doubled since end of 1980’s. n 6 main principles underpin the policy – Concentration of Assistance; Co-ordination – Partnership; Subsidiarity – Programming; Additionality n There were three main objectives – Objective 1: Eligible areas are those that have less than 75% of EU average GDP. – Objective 2: Aims to support the economic and social conversion of areas facing structural difficulties. – Objective 3: This Objective involves only the European Social Fund. Principles & Objectives of EU regional policy Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 10 Impact of policy in Objective 1 regions Rodriguez-Pose et al, Between Development and social policies, Regional Studies, February 2004 n Number of regions eligible has risen steadily from 44 in 1989 to 67 now representing about 30% of the EU budget. n Spending in 4 priority areas; agriculture & rural (8%); business and tourism (23%); investment in human capital (13%) & investment in transport, infrastructure and environment (49%) n No observable regional convergence (GDP per capita terms) overall in the EU and only slow convergence in the sub-set of Objective 1 regions. n No real positive association between structural funds and regional growth up to 6 years following the initial investment. n Impact of expenditure in agriculture positive in the short-run but tails off; infrastructure and business support have little short/medium-term benefit and weak in the longer-run; by contrast human capital development has a positive effect on regional growth. Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 13 Agreement was reached at the Lisbon Conference in March 2005 on the future direction of EU policy: There were to be four political priorities. n Sustainable development; competitiveness, cohesion n Conservation & management of natural resources n Citizenship, freedom, security, justice n The EU – a global trade partner Finance n Total budget has an annual ceiling of €146.4 billion; €48 billion for structural actions (was €37 in previous period); n 50% in new 50%, in old member states; n 75% in lagging regions n Accounts for 34% of total EU budget Shape of EU regional policy from 2007 Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 14 The scale of the challenge Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 17 Simplification: n Reduction in number of financial instruments: to 3 from 6 the only additions single fund programmes. n Clearer division of responsibilities with the sustainable development policy. n Reducing the stages of programming (policy document from each Member State, operational programmes). n Simplification of financial management (priority axes). n Controls: introduction of proportionality, contracts. More focused than before Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 18 Main themes from 2007 n Convergence and competitiveness Regions less than 75% of EU 25 average GDP/head: accounts for 78% of total regional expenditure: States with less than 90% of EU 25 average GNI/head have access to Cohesion Fund). Phasing out support available for those losing eligibility. n Competitiveness & employment all regions eligible: 18% of total: 2 elements Regional competitiveness & Employment. Aimed at innovation, knowledge society and entrepreneurship n European territorial cooperation Boarder regions including sea: 4% of total: Based on INTEREG: Promote harmony through annual interregional programmes. Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics Slide 20 Where is the money going? Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b

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Regional and local economics What next? n Regions 2002 published November 2008 is an attempt to highlight the issues that the EU will need to address over the next 10 years. n The transformation to a knowledge economy and managing social change n Aging society giving rise to questions about economic efficiency, and inter-generational equity. n Mitigating against climate change and adapting to it n Secure, sustainable and competitive energy requirements n The gap between rich and poor regions estimated at 8:1 n The policy response is yet to follow Slide 21 Regional and Local Economics (RELOCE) Lecture slides – Lecture 8b